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How a Loan Between Friends Can Destroy the Relationship

Asking friends for loans is like asking them for sex: Whatever happens, the relationship will never be the same again.

At this point in history, money holds such massive emotional baggage that asking  Can I have some of yours for a while?  or Will I ever get it back?  are some of life's weightier questions.

And now, we the people -- underwater, unemployed and terrified -- are forced ever more into the position of borrowing and lending among ourselves. Facing increasing personal financial crises, many of us now gaze dollar-sign-eyed at those with whom we lunched and shopped and shared secrets in gladder times.

When friends ask friends for loans, what's  really being asked? What's the emotional "interest" on such loans -- and can friendships survive them?

Ella Hodges had three kids and worked part-time for a law firm when her husband's business failed in 2010. For the first time in her life, she needed to borrow money. But from whom?

"I knew that my friend Bree had a lot of money, and I knew she would say yes," Hodges remembers. "She knew I had always been very fiscally careful, so she trusted me. But how could I put Bree into the position of worrying that maybe the payback might never come? How could I put that burden on our friendship?"

Debating endlessly what she calls "the ask," Hodges thought about a neighbor who had run into hard times.

"She received numerous $1,000 loans from fellow church members who, when they later saw her at McDonald's or the movies, were clearly thinking: 'Sarah, is this really the best use for  my money?'"

Borrowing from banks has its downsides, "but money loaned between friends is not free of strings. It's not clean. Conditions are imposed either implicitly or explicitly that give the giver a permanent one-up over the getter," Hodges says. "One friend will always be high, the other low, and someone will always feel judged. Borrowing money from Bree would make her my banker. She could then justifiably scrutinize every decision I made. If she loaned me money, then asked me out for drinks, should I not drink? If I buy a car, does she get to choose it?

"I'm a very self-conscious person. Others aren't. They wouldn't share my concerns about borrowing money or spending it."

Tory Fisk learned this when his friend, a laid-off computer programmer we will call Jed, asked Fisk last year for an $800 loan.

To music-teacher Fisk, $800 was a lot.  "Friends are usually in the same economic class as each other, so if you ask your friend for money, that friend is probably not going to be some cavalier Richie Rich smoking solid-gold cigars. It'll be someone to whom the amount of money you're requesting seems substantial."

Having always earned more than Fisk, Jed spent freely -- "so we always had the same amount: not much. And always assuming that he would always be employed, he eventually realized that he wouldn't."

Jed told Fisk he needed the $800 "for essentials like food," and promised to repay it in $50 monthly installments.

"In typical scam-artist fashion, he lavished me with praise: 'You're my best friend in the world.' So you feel guilty for not wanting to give. Also in typical scam-artist fashion, he said, 'If the situation was reversed, I would do it for you.' But the situation never  would be reversed. So of course he could make these grand promises that he knew he would never need to keep," Fisk says.

Fisk loaned Jed the money. 

Jed missed the first payment, then the next. One day Fisk was startled to see Jed "wearing a fancy new suit. He said that when you're down and out, you need good clothes to impress potential future employers.

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